Friday, January 8, 2010

Canadian stocks will outperform the U.S. for a seventh year in 2010, spurred by demand for oil and metals, according to Philip Petursson, director of institutional equities at North America’s largest insurer.

Efforts by U.S. banks to help distressed homeowners have focused mainly on temporary fixes such as interest-rate reductions that may only put off the day of reckoning, despite policy makers wanting them to do more.

Banks may be forced to resort to a remedy they’ve been trying to avoid -- principal reductions -- as another wave of foreclosures looms and payments on risky loans rise, Bloomberg BusinessWeek magazine reports in the Jan. 18 issue.

While interest-rate reductions or extending loan terms reduce homeowners’ monthly payments, they don’t give much comfort to borrowers who owe more on their homes than their properties are worth. Borrowers who don’t have equity in their homes are more likely to hand over the keys when they run into trouble. “The evidence is irrefutable,” Laurie Goodman, senior managing director of Amherst Securities Group in New York, testified before the U.S. House Financial Services Committee on Dec. 8. “Negative equity is the most important predictor of default.” (more)

Vacancies at U.S. strip malls hit an 18-year high in the fourth quarter and the vacancy rate for large regional malls reached the highest in at least 10 years, according to real estate research firm Reis Inc.

Strip malls -- neighborhood and community shopping centers typically anchored by grocery or drug stores -- had a vacancy rate of 10.6 percent in the fourth quarter, surpassing the high set in 1991, Reis economist Ryan Severino said in a report released on Wednesday. The early 1990s is a period often referred to as the commercial real estate depression.

"Our outlook for retail properties as a whole is bleak," Severino said in a statement. "Until we see stabilization and recovery take root in both consumer spending and business spending and employment, we do not foresee a recovery in the retail sector until late 2012 at the earliest." (more)

Tim Geithner, then head of the New York Fed, blinked and screwed the American taxpayer out of billions of dollars in the process. How so?

Geithner and his cronies in Washington have misrepresented–if not outright lied–about the payments to both domestic and foreign banks in settling exposures to then failing AIG. While politicians and pundits alike will reference the precarious nature of the time and heat of the moment to defend Geithner and his cronies, the simple fact is the settlement of the AIG swaps at 100 cents on the dollar was nothing short of one of the greatest heists in our country’s history.

This heist transferred multiple billions of dollars from the American taxpayer to the likes of Goldman Sachs, JP Morgan, Societe Generale, and many more domestic and foreign banks as well. (more)

The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.

Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.

The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession. (more)

A Republican congresswoman, who has been in the forefront of the fight against the healthcare bill, the climate control bill and other contentious measures, warned in an impromptu interview on Breitbart.tv Thursday evening, that a fast-tracked, under-the-radar mega-bill by Rep. Barney Frank, D-Mass., designed to overhaul the regulation of the entire financial services industry – and headed at the time for passage by the House -- is “even worse.”

“I know that’s hard to believe, but it is worse in the sense that every American makes financial transactions,” said Michele Bachmann, who represents the people of Minnesota’s Sixth Congressional District. “We all use credit cards, we all write checks. This will all now be controlled by government, and government will ration credit. You can’t have capitalism without capital, and government will decide who gets capital and who doesn’t.” (more)

“With all the record Treasury debt being ‘snatched up,’ as you mentioned last week,” a reader writes referring to record U.S. government debt sales in 2009, “you need to have someone follow up on and research WHO is buying all that debt -- and publish that list. That would be interesting to see.”

The 5: The Treasury keeps some of this data on a public site, hidden under enough nerdy language to discourage layman comprehension.

But that’s just one layer of this stinking onion. Your editor was paging through the latest issue of The Richebacher Letter yesterday and found this -- which takes your question to the next level: Not only who is buying it, but how are they paying for it?

“Foreign investors, U.S. households and the Federal Reserve are the most aggressive purchasers of Treasury debt in recent quarters,” writes editor Rob Parenteau. “Most of the purchases of U.S. Treasuries came from foreign official investors, namely foreign central banks.

“During the year ending in Q3 2009, the U.S. current account deficit shrank to $465 billion. That represents $465 billion of foreign net saving that could be used to purchase U.S. assets, yet we find foreign central banks purchased $546 billion in Treasuries, which means they absorbed nearly a third of the net issuance…

“We believe this increased foreign exposure to Treasuries in part reflects a recycling of proceeds from sales of agency and government-sponsored enterprises (GSEs) to the Fed. As the Fed purchased $809 billion of agency and GSE debt (on a trailing four-quarter average) through 2009 Q3, $282 billion of that total was acquired from foreign investors, of which $197 billion was bought off the balance sheet of foreign central banks… In other words, over a third of foreign central bank Treasury purchases are likely to have been financed with dollars that the Fed provided.

“We return to your original question: Who is buying Treasuries? The answer is the Fed, and households and foreign central banks that received money from selling agency and GSE debt to the Fed. Remove the Fed from the picture, as is currently planned by the end of Q1 2010, and placing all the new Treasury issuance may not be such a cakewalk in 2010 as it appeared to be in 2009.”